NEWPORT (WATE) – Court documents reveal how the Tennessee Bureau of Investigation was able to implicate a longtime Newport police captain in a drug and money laundering scheme.

Det. Capt. James Holt, 59, his wife Alderwoman Kathy Holt, 50, her son Kenneth Myers, 31, and Det. Capt. Roger Lynn Shults, 50, were all indicted by a grand jury in the case.

According to a complaint filed in U.S. District Court, Holt is accused of distributing a Schedule II controlled substance and possession of a firearm in furtherance of a drug trafficking offense. The Tennessee Bureau of Investigation says he is also charged with official misconduct and several money laundering related offenses.

The court complaint says the FBI and TBI received numerous allegations of illegal activity by Holt prior to April 2014. That was when their investigation began in earnest.

A confidential informant agreed to cooperate on April 2, providing information regarding Holt’s alleged criminal activity. The informant said he had sold Holt items the informant and family had stolen, and that Holt knew they were stolen. The items included cigarettes, tobacco-related products, dish detergent, diapers, food and dry goods, and gift cards obtained by stealing merchandise and then returning it to the store in exchange for a refund.

TBI agents gave the informant five cartons of cigarettes they had purchased, with the intent of selling them to Holt as stolen merchandise. Agents fitted the informant with an electronic transmitting device, a digital recording device and a hidden camera.

A surveillance team followed the informant to the convenience store owned by Holt and his wife Kathy at 405 Cosby Highway.

The complaint says Holt arrived in his police department issued vehicle with a gun holstered to his waistband and a badge clipped to his belt.

During the informant’s meeting with Holt, the informant represented the cigarettes as stolen and said he could provide more. Holt agreed to purchase any cigarettes the informant brought him. Holt paid the informant $60 for the cigarettes, which were actually worth $268.

Another meeting happened on April 25, watched by TBI agents. The informant sold Holt 12 cartons of cigarettes and 29 packages of candy provided by TBI agents to represent as stolen. The value of the merchandise was $611, but was sold for only $235.

During the same meeting, the informant asked for a list of merchandise Holt needed, which Holt’s wife was able to provide.

During an April 30 meeting, the informant sold Holt $582 worth of merchandise provided by TBI for $180. Hydrocodone pills were discussed during this meeting, which Holt agreed to provide in exchange for stolen merchandise in future transactions. Such an exchange happened on both May 1.

Meetings between the informant and Holt, monitored by TBI agents, continued on May 2, May 7, May 27, June 4, June 18, June 19, June 30 and July 1.

On the June 19 meeting, Holt said he could not provide hydrocodone pills but instead offered Xanax pills. TBI agents watched as Holt went to the Newport Police Department to retrieve the pills and deliver them to the informant at the gas station.

During the course of the investigation, the TBI marked the merchandise sold to the Holts so it could be identified later. Undercover agents then purchased items from the Holts’ store, which were then confirmed to be the same items the informant had sold.

The investigation also revealed another Newport police captain, Roger Lynn Shults, allegedly participated in the illegal activity, although in a lesser extent, while on duty and that Kathy Holt’s son Kenneth Myers was involved as well.

A detention and preliminary hearing for James Holt will be held on July 29 in Greeneville. He will be held without bond until then.

Police chief stands by officers

Newport Police Chief Maurice Shults told 6 News he has placed Lynn Shults, his brother, and James Holt on administrative leave without pay while the investigation continues but said he is standing by his officers.

“Like every case that’s made, innocent until proven guilty,” Maurice Shults said. “Lynn is my brother, has been for fifty years. I stand by him as my brother. I stand by him professionally and Detective Holt and I’ve got a job to do and we’re going to keep the people of Newport as safe as we can while we transition through this.”